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Economics

Explore the institutions in an economic system and how they work together, along with the concept of economic interdependence. Learn about the economic cycle, growth vs. recession, GDP, different institutions (business firms, banks, government agencies, labor unions), entrepreneurship, market structure (perfect competition, monopolistic competition, oligopoly, monopoly), inflation, surplus, deflation, and interdependence between countries.

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Economics

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  1. Economics

  2. Essential Questions • What are some institutions in an economic system? • How do they work together?

  3. Economic Cycle

  4. What is it? • The natural fluctuation of the economy between growth and recession • Influenced by many factors (production, unemployment, consumer spending) • It can move very quickly or very slowly between the highs and lows

  5. Growth vs. Recession Growth Recession Decline in economic activity Economy is getting weaker • Economy is getting stronger • More goods are being produced

  6. Gross Domestic Product (GDP) • Total value of all goods and services produced in a country during a specific time • Acts as a “scorecard” to show how healthy a country’s economy is • Current US GDP: $20494.10 billion, 33.06% of the global economy

  7. Bell Ringer: • How did Wall Street get its name?

  8. Economic System

  9. The Different Institutions • Business Firms • Banks • Government Agencies • Labor Unions • Corporations

  10. Corporations • Business organization owned by stockholders • Multiple companies organized as a single business • i.e. 3M, ABC, CBS, NBC, Nike, Under Armour, Campbell Soup, Chevron, Office Depot

  11. Business Firms • A commercial organization that sells goods or services for a profit • Owns or operates multiple establishments • Synonymous with company

  12. Banks • Institution that receives, lends, exchanges, and safeguards money • Lent money comes from the investors who keep their $ in the bank (YOU!!) • i.e. Bank of the West

  13. Government Agencies • Administrative unit of the government • i.e. Federal Deposit Insurance Corporation, Securities and Exchange Commission, IRS

  14. Labor Unions • Organization of wage earners or salaried employees who protect each other from and deal with employers • i.e. AEA, NEA

  15. Bell Ringer • Describe the different economic institutions.

  16. What is… The relationship between these institutions? Or How do they work together?

  17. The Relationship… • Labor unions protect the worker/consumer • Allow workers to have free time and (some) money

  18. Which allows… • People to place their money into banks • That lets them save money $

  19. Or… • Invest their money in corporations • Where they become share holders

  20. These corporations… • Enter into contracts with other companies

  21. Which are regulated by… • Government agencies • That set policies and rules businesses are supposed to follow

  22. In order to… • Protect the consumer/laborer • Who is a member of the union

  23. Entrepreneurship:

  24. Entrepreneur • A person who starts a business and is willing to risk loss in order to make money • Examples: Duck Commander, Orange County Choppers, Microsoft, Ford etc.

  25. Market Structure • There are four types of markets: Perfect Competition, Monopolistic Competition, Oligopoly, & Monopoly

  26. Perfect Competition • A large number of small firms compete against each other • No Single firm has significant power • All firms maximize profits and they sell identical goods

  27. Monopolistic Competition • A large number of small firms compete against each other • Sell similar but different products • Certain degree of market power • Consumer choice increases • Example: Breakfast Cereal

  28. Oligopoly • Dominated by a small number of firms • Usually 3-5 total • Limited competition, firms set the prices • Products may be similar or differentiated • Example: Gaming consoles

  29. Monopoly • A single firm controls the entire market • Monopoly sets the price • No consumer choice • Example: local phone and power companies

  30. Inflation

  31. What is it? • General increase in prices while purchasing value of money stays the same, declines, or rises slower than the increase in prices

  32. Imagine you have $40 for groceries per week. Look at last year’s column. That is what you could buy. Now, imagine that prices go up but you still have $40. Look at this year’s column. That is what you could buy.

  33. Impact • Can have a negative impact on society when prices of goods and services rise faster than wages • Think of a balloon as it is being blown up and pops because there is too much air in it

  34. Surplus • An excess of product or supply over demand • In other words: Something that is left over

  35. Deflation

  36. What is it? • Decline in prices of goods and services • Associated with the contraction of available money or credit in an economy • Long term: purchasing power of currency goes up

  37. What is it? • The amount of goods and services that are available for people to buy compared to the amount of goods and services that people want to buy • If less of a product than the public wants is produced, the law of supply and demand says that more can be charged for the product.

  38. Bell Ringer • How do countries rely on each other for economic support? Do some countries have more economic resources than others? Discuss at your tables.

  39. Interdependence

  40. Essential Questions • What is economic interdependence? How does it affect the economic development of nations? • What are some examples of economic agreements between nations? How have they affected the economic development of those nations?

  41. Interdependence • The reliance of nations on each other for economic growth

  42. Nations • People of multiple races and cultures organized into a single state/country

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